You know you need car insurance to protect you against big losses, but how much car insurance is enough? Should you cut down on coverage to save on costs? At Philleo Agency Insurance, we know everyone wants to save money on car insurance, but that should never be more important than having enough insurance protection to meet your needs. This article will discuss important reasons why having the right types of coverage and adequate limits is the most important part about purchasing car insurance.
To Repair or Replace Your Damaged, Destroyed, or Stolen Vehicle
When your vehicle is damaged – and at least statistically speaking, it will be – how will you afford to repair it? If you find out the damage is too severe to be remedied, will you have the cash on hand to pay for a replacement? Collision and comprehensive insurance provide coverage against physical damages to your personal vehicle. It is the type of coverage that protects your investment and the monetary value of your car.
Collision insurance covers damages to your vehicle when a car accident causes them. A collision can be distinguished as a collision involving your vehicle with another vehicle or an immobile object, such as a tree.
Comprehensive insurance covers damages to your vehicle when they are caused by random and unexpected events that are generally outside of your control. Examples include damages caused when you hit a deer that darts across the roadway or when a thief takes off with your car.
Claims against your insurance for physical damages to your personal vehicle typically require that you pay a deductible. The deductible is the out-of-pocket amount you are responsible for paying toward the cost of each claim no matter how big or small. You can choose your deductible when you purchase your policy. Some drivers prefer a small deductible that eases the financial burden of filing a claim, whereas others prefer a large deductible that reduces the upfront cost of insurance premiums. Whatever you decide, make sure it is an amount that fits your budget and preferences.
There are no insurance limits to choose when it comes to collision and comprehensive coverage. Most vehicles are simply insured for their actual cash value or ACV. Some vehicles – particularly antique cars and collector vehicles – are insured for an agreed value. The terms of your coverage will be listed within your policy. When you file a covered claim, your insurer will pay for the cost of repairs minus the value of your deductible. If the costs are very high – more than the ACV of your car – you may receive a check from the insurance company reimbursing you for the total loss of your car.
Who Needs Collision and Comprehensive?
Most drivers need collision and comprehensive coverage even though it is not a legal requirement. Not only can it protect you against major financial loss, but it may also be mandatory coverage for drivers who lease their vehicles or finance them through a lender. This helps to protect the financial interest of the dealer or lender until the vehicle is paid for or returned.
To Repair or Replace Someone Else’s Damaged Property
Accidents often involve more than just one vehicle. If you cause a collision that results in damage to another person’s car or property, you could be financially responsible for compensating the victim for his or her losses. All drivers here in Wisconsin are required to carry a minimum amount of property damage liability insurance. Unfortunately, the minimum coverage you need to stay in compliance with the law is often far too little to cover what you need after an accident.
If you crossed the median one night and hit a brand new Chevrolet Tahoe head-on, you might owe as much as $50,000 in replacement damages. If you plow through a fence and into someone’s kitchen, you might have to pay to replace countertops, appliances, interior walls, exterior walls, landscaping, and the fence. If you only had the minimum $10,000 in property damage liability protection, the victims or their insurance companies could pursue your personal assets and income for the remainder of the damages.
Having high enough limits on your property damage liability coverage could protect you against a major lawsuit if you are at-fault for an accident.
Compensation for Harm You Cause Others
Car accidents can leave behind a slew of damage – especially if injured victims are involved. That is why all drivers need bodily injury liability insurance to protect against expensive lawsuits. This coverage is designed to compensate victims for the cost of their injuries, including medical bills, lost wages, emotional distress, and more. Considering the compensatory and punitive damages from these types of claims often total tens or even hundreds of thousands of dollars, we here at Philleo Agency Insurance recommend carrying much higher bodily injury liability limits than the state requires. Without adequate limits, you could become personally responsible for paying any damages that exceed the limits on your bodily injury liability coverage.
Anyone can cause an accident at any time – even if you consider yourself a safe driver. It’s not always texting behind the wheel or driving under the influence that causes accidents, either. You could skid on a patch of ice, blow a tire on the highway, or perhaps just be in the wrong place at the wrong time. It does not matter how it happens; only that it did, and it is partially or totally your fault. There may be little you can do to avoid it, but you can take steps to protect yourself from financial devastation.
Split Limits vs. Combined Single Limit (CSL)
When you select your bodily injury liability coverage, your insurer will either offer you a combined single limit (CSL) or split limits. A CSL appears on your insurance policy as a single number, such as 300 CSL. In this case, the insurer would cover up to $300,000 of total bodily injury damages for an accident, regardless of how many victims are involved.
Split limits are slightly different in that there are two different limits the insurer imposes on policy-holders. An example of a split limit would appear as 250/500, with the first number indicating the insurer will only pay a maximum of $250,000 in bodily injury damages per injured individual. The second number means that a maximum of $500,000 in damages is available for all victims combined in a single accident.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
Perhaps the most important part of your insurance policy is the coverage that protects you and your passengers if you are injured by an uninsured or underinsured driver. Uninsured motorist (UI) and underinsured motorist (UIM) compensate you and your passengers for medical bills and other expenses when the at-fault driver is either uninsured or has too little coverage to pay for your losses.
Money to Help with the Little Things
Sometimes the smallest or least obvious expenses total up to a major financial burden – particularly after an accident. For example, your health insurance might cover the bulk of your medical bills, but only after you pay co-pays and a hefty deductible. If your car is damaged, you might have to find alternative transportation to work and pay towing charges from your accident. By adding extra coverage to your policy, you can receive medical payments coverage, as well as compensation for extra expenses, such as rental cars and towing.
Beyond Car Insurance
At Philleo Agency Insurance, we work hard to prevent gaps and holes in your coverage. Even the most comprehensive insurance policies, however, may come up short of covering your entire liability after an accident – particularly for major collisions that result in multiple injuries, permanent disabilities, or even fatalities. In the event of a $1 million lawsuit, for example, a maximum bodily injury liability limit of $500,000 would only pay a fraction of the damages. Without an umbrella policy, the at-fault driver may have to pay the remaining liability from savings or by liquidating personal assets. If that still is not enough to cover the claim, the driver might have to make payments from future income to satisfy the debt.
Umbrella insurance is an affordable way to supplement the liability coverage on your primary insurance policies. This important coverage picks up where your car insurance leaves off, extending your liability protection by as much as $1 million or more. Purchasing an umbrella policy now could protect you and your family against financial devastation, saving you hundreds of thousands or even millions of dollars. To find out more about umbrella insurance and whether it could be right for you, contact our office today.